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Careium: Awaiting visible UK synergies - ABG

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Q3e: sales up 23% y-o-y but margins remain pressured

We expect 2023e to show improvements

Small positive sales revisions, but costs up as well

Q3’22e to share dynamics with H1’22
We forecast Q3e sales and adj. EBIT of SEK 173m and SEK -4.1m, respectively, corresponding to y-o-y sales growth of 23% (15% organic) and an adj. EBIT margin of -2.4%. While we find the top line development more encouraging, Careium still needs to show the synergies in the UK, which we believe explains the lion’s share of the margin pressure. In Q2’22 we saw strong development in the product sales, up 35% y-o-y, and we expect the strong momentum to continue (although slightly hampered by seasonality as the summer months are usually slightly slower). On subscription sales, we estimate zero q-o-q growth in the number of subscribers, and thus subscription sales as well, awaiting the historically stronger Q4 to show a small q-o-q revenue increase. Finally, on costs, we expect a continued pressured gross margin (we estimate 37.2%) following e.g. high component costs and freight rates, and adj. opex to remain in line with H1 average levels. As a result, we arrive at an adj. EBIT margin of -2.4%.

Price increases in 2023e, coupled with UK cost efficiencies
After a slower 2022 on earnings, we see some positive factors supporting 2023 onwards. Given its large exposure to the public sector, we assess that Careium should be resilient towards a weaker macro picture. In addition, pricing power naturally becomes an important factor in a high-inflationary environment, where Careium’s contracts are generally indexed to rise alongside the inflation. Assuming the UK restructuring programme proceeds as planned, we could see a stronger 2023 on the cards, especially looking at the improvement trend, coming from pressured levels.

’22e-’24e tweaked sales, adj. EBIT margin slightly down
We tweak our sales estimates, increasing ’23e sales growth by 1.5pp following the high inflation rates that we assess should support ...
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Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/careium/Equity-research/2022/10/careium---awaiting-visible-uk-synergies/

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